HELOC/2nd News; SIFMA Rate Forecast; Tax Court Ruling for Brokers

One court ruling from 2017 is that a mortgage broker is not a real estate professional, so passive activity rules apply. Yes, 2017 is now in the history books, and of course we will soon be seeing estimates of residential lending volumes for last year. (The exact numbers won’t be known until the HMDA data in September, and know that some companies don’t report volumes to non-government tallying services.) The starting point of the numbers is pure retail, since wholesale and correspondent derive their volume from other’s retail sources. It would be a surprise if anyone cracked into the Top 25. Through September: Wells Fargo, Bank of America, Quicken Loans, Chase, Fairway Independent, Guaranteed Rate, Caliber, Guild, Movement, loanDepot, Navy Fed, U.S. Bank, Finance of America, Citi, Homebridge, SunTrust, First Republic, Stearns, PNC, BB&T, Fifth Third, Freedom, TD Bank, Waterstone, and MUFG Union Bank.

HELOCs and 2nd Mortgages

With millions of borrowers happy to make payments on their 3.50% 30-year fixed rate mortgages, the strength of the refi market in 2018 is questionable… unless someone needs cash.

If someone has a mortgage or home equity loan that was not at all used for purchasing a home or remodeling a home, they will not be able to take a deduction in 2018 for any interest payments on this loan. So, some people paid off their home equity lines of credit (HELOCs) before the end of the year. Any decline in home equity balances could be offset by higher demand for other types of consumer loans. The worry is that only borrowers with blemished credit will take out home equity loans, increasing banks’ risk.

TD Bank released its home equity survey, which found that 80% of HELOC borrowers who said that they were planning home renovations for the current winter season also said they would consider dipping into their home equity for funding. Respondents have an average HELOC size of more than $84,000 and half (51%) stated they plan to spend at least $50,000 on renovations as winter approaches.

TD Bank also asked approximately 200 additional homeowners who participated in last year’s HELOC Reset Measure what happened when their draw period came due this past year, and discovered that: twice as many homeowners surveyed in 2016 who said they intended to refinance their HELOC this year (13%) actually did so (28%). Of those approaching their reset period who decided to refinance, 68% kept a HELOC at the same amount or higher. 85% of HELOC borrowers who chose to refinance said the borrowing process was easy. More than half (52%) plan to stay in their homes for at least 10 more years, giving them the opportunity to build additional equity that can either be leveraged through an existing HELOC refi or a brand new HELOC (after their current one has been paid in full and closed).

Flagstar announced the launch of the Home Equity Line of Credit, Doc. #5561 product for concurrently closed first/second lien transactions. The HELOC product takes a subordinate lien position behind a new Flagstar Bank first mortgage. Customers can now originate both parts of a first mortgage/HELOC transaction with Flagstar Bank in Loantrac.

Mountain West Financial Wholesale’s Mountain Combo Product will now be offered as a standalone 2nd. It offers a 10, 15, 20 and 30-year option. The product matrices and pricing engine are updated with these changes.

Capital Markets

SIFMA’s Economic Advisory Roundtable (a group of noted chief economists) put out its forecasts for 2018. No one has a crystal ball, but averages of forecasts tend to be more reliable. In its year-end economic outlook, the Roundtable forecasted that the US economy grew 2.3% in 2017, strengthening to 2.5% in 2018. Employment is expected to continue improving, and respondents predict the unemployment rate to average 4.4% in 2017, falling to 4.0% in 2018.

“The median survey forecasts for 10-year Treasury rates were 2.45% for December 2017 (a little high), 2.55% for March 2018, 2.66% for June 2018, 2.80% for September 2018 and 2.80% for December 2018. Inflation and inflationary expectations was the dominant factor cited affecting Treasury yields in the first half of 2018, followed US economic conditions and Federal Open Market Committee interest rate policy.”

“US fiscal policy was considered the most important factor affecting US economic growth, closely followed by Federal Reserve actions. Upside risks most often cited include tax reform, fiscal stimulus and inflation. On the downside, global slowdown, geopolitical shocks and a market correction affecting confidence were the leading causes for concern.”

Shifting our collective gaze to the actual bond markets, as expected, the final trading day of the year was very quiet. The 10-year Treasury note finished the year yielding 2.41% versus beginning the year yielding 2.45%. But the spread between 2-year and 10-year rates compressed to 53 basis points. Looking ahead to 2018, Freddie Mac projects the 30-year fixed rate mortgage to trend higher through the year from a projected average of 4.10% in the first quarter to 4.60 percent by the fourth quarter.

Today is a day where supply and demand will be tested since there are four Treasury auctions: $48bn 13-week and $42bn 26-week bills at 11:30am, and $50bn 4-week and $20bn 52-week bills at 1pm. The Desk of the NY Fed will also be buying $1.295bn Ginnie IIs across the 3%, 3.5% and 4% coupons.

There isn’t much in the way of news today (US Markit manufacturing PMI for December at 6:45AM PT). But the economic calendar kicks in tomorrow with the weekly MBA Mortgage Index, December ISM Manufacturing Index, November Construction Spending, and December auto sales. Thursday brings the December ADP Employment report, weekly initial jobless claims and natural gas and crude oil inventories. On Friday, December Nonfarm Payrolls, December Unemployment and Hourly Earnings, November Trade Balance, November Factory Orders, and December ISM Non-Manufacturing Index are released. We start Tuesday, and 2018, with the 10-year yielding 2.43% and agency MBS prices worse .125 versus Friday’s close.

Jobs, Products

A well-known financial institution, located in the Midwest, is actively searching for an experienced executive in residential Loan Servicing to join its senior leadership team. The successful candidate will have extensive experience with the intricacies of loan servicing in relation to Fannie Mae, Freddie Mac and Ginnie Mae. Thorough knowledge and understanding of CFPB regulations along with experience in investor reporting, remittance, and reconciliation is vital. Please send confidential notes of interest to me for forwarding.

WEI Mortgage, a subsidiary of Arc Home Loans, has recently hit “The Billion Dollar” milestone for originations in its TPO channels as WEI continues to grow its production in a short period of time. Additionally, WEI Mortgage is now offering a Non-Agency (Non-QM) product suite which includes a DTI, Foreign National, Clean Slate and an Investor Product, and the Non-Agency (Non-QM) product in both its Correspondent and Broker Channels. Feel free to reach out to John Douglas, VP of Business Lending, to inquirer about being a partner.

Wrapping up a record-breaking 2017, Angel Oak Mortgage Solutions is continuing to add to its dynamic roster by adding Wholesale Account Executives in markets across the country, specifically in Sacramento, St. Louis, Baton Rouge and Fresno. To continue to deliver an extraordinary customer experience while realizing record monthly volumes, it is also hiring underwriters and other operations positions in Atlanta and Dallas. As more companies realize the benefits of offering non-QM products, it only makes sense to work with the market leader. Visit JoinAngelOak.com or learn more about what it’s like to work for Angel Oak by watching the Top Mortgage Employer’s interview from the Mortgage News Network.

Learn how renovation loans can enhance your origination business by attending Home Point Financial’s session “Enhance Originations with Renovation Products” at the New England Mortgage Expo Presentation at 11:15 am on January 12th at the Mohegan Sun. Join Home Point’s Managing Director Brad Smith as he shares how renovation lending can boost your Correspondent business in 2018 and help you reach Millennials. Home Point experienced tremendous success in 2017 and is growing rapidly in the Northeast and across the country. To learn more about how to become a Correspondent partner in 2018, call Correspondent Sales Manager Jim Janczy at 508.965.8055 or stop by their booth (#780) at the show.

Events and Training

In Washington, register for the WMBA’s Income Property Lunch with Economist John Mitchell on January 4th.

The reconciled tax reform bill is the most sweeping federal tax legislation in more than three decades. Register for CSH’s Webinar on January 10th at noon EST. Dan Fales and Tony Schweier will assess the tax laws and what these significant changes mean to your business. On January 11th at noon EST, CSH’s Mark Gaudet and Larry Powell will discuss, via webinar, what you need to know about the new tax law’s impact your individual taxes and your tax plans.

CALCAP Lending, LLC a direct lender specializing in bridge and investment property lending is pleased to announce the opening of a new production and operations platform located at 2603 Main Street in Irvine, California. In conjunction with this expansion, the company is hosting a job fair on January 11th from 10:00am – 3:00pm to meet with talented loan originators, processors, underwriters and funders seeking career advancement opportunities in the high demand bridge lending marketplace. To reserve a confidential interview in person or obtain more information, you are invited to email CALCAP, contact Recruiting Manager Travis Downie, or give CALCAP a call at 623-337-4504.

Join MBA ST. Louis for lunch, networking, and discussion on the Mortgage Backed Securities and Macro-Economic Impact with Gaetano Antinolfi, Professor of Economics at Washington University on January 18.

Ditech business lending has released its January Client Development Calendar which offers a comprehensive training curriculum on ditech products and processes. In addition, various Government Basic Sessions (FHA, VA and USDA) and other customized sessions have been scheduled.

Mortgage Coach announces the most viewed and shared YouTube videos of 2017. I encourage managers and coaches to share these videos with your team. Originators who want to make 2018 the best year ever and make the digital transformation as a mortgage professional should watch at least one video per week. CLICK to see the top 12 videos of 2017.

Regulatory leadership may change, but the need for a compliant complaint management system does not. Join October Research, LLC for its Consumer Complaints: Meet Expectations webinar 2-3 p.m. Feb. 6th. Compliance attorneys Mike Flynn, Partner at Goodwin and Proctor, and Allyson Baker, Partner at Venable, LLP, will teach on: Meeting and staying current on expectations for competing government regulations; how to build and maintain compliant management systems; implementing an effective continuous training program and more.